ADraw a Figure,using the Keynesian IS-LM Framework,of an Economy in Recession

question 64

Essay

a.Draw a figure,using the Keynesian IS-LM framework,of an economy in recession.
b.Now suppose the IS curve shifts to the right far enough that if the real interest rate is unchanged,output will increase beyond full employment.If the Central Bank's goal is to move output to its full-employment level,what must happen to the real interest rate? What is the effect on the price level?
c.Suppose,before the Bank can act,that the government announces a restrictive fiscal policy,shifting the IS curve to the left relative to its position in part (b).What is the Bank likely to do (relative to what it would do if fiscal policy wasn't restrictive)if its goal is to target full-employment output? What happens to the real interest rate relative to what it is in part (b)?

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Definitions:

Merchandise Purchases

The total cost of goods bought for resale during a specific accounting period, excluding any discounts or allowances.

Cash Disbursements

The total payments made by a business for various purposes, including expenses, purchases, and debt repayment.

Operating Expenses

Ongoing expenses incurred in the normal operations of a business, including rent, utilities, salaries, and marketing costs, but excluding the cost of goods sold.

Sales Budget

A detailed projection of future sales, often broken down by product line, region, or sales channel, that guides business planning.